Student loan rates a political football

Linda Conner Lambeck

Updated 6:26 pm, Saturday, July 27, 2013

Student loans and the interest rates that go with them are a necessary evil in Marcus Harris' book. The 26-year-old undergraduate, a communications major at Central Connecticut State University in New Britain, will leave college next year about $30,000 in debt with a fixed interest rate of less than 4 percent.

But that's not what worries him.

His concern is the rate his younger siblings will pay when they go to college in a few years.

"They are going to be paying way more," he said. "We may not be even able to afford it."

Action this past week by the U.S. Senate -- and expected action by the House -- on a bill that will retroactively lower interest rates offers him no peace of mind. Interest rates on student loans doubled on July 1.

To Harris and others, the compromise legislation, which Connecticut's two senators voted against, is nothing more than a Band-Aid. The new lower rate is tied to a fluctuating 10-year Treasury note that is expected to go up within the next few years.

At UConn, 45 percent of the student body is shouldering federal student loans. Lucas said she would like to see the rates as low as possible, but doesn't think interest rates play a factor in whether students will go to college.

We haven't heard from students on this," she said.

At least one UConn student, however, has spoken out on the issue.

Before the compromise was reached, Edward Courchaine, president of the Student Government Association at UConn, said any increase in the loan rate would place a substantial financial strain on students long after they are finished with college. Without interest rate relief, many students won't be able to pay for college and the state won't have an educated workforce, Courchaine said.

Abe Scarr, director of The Connecticut Public Interest Research Group, condemned the Senate action as a quick fix that will end up costing more in the long run. The average college graduate in Connecticut paying back student loans carries $28,783 in student debt, according to ConnPIRG.

Scarr said he wants the House to vote no, but in the absence of that, wants a long-term solution developed.

President Barack Obama, in applauding the Senate compromise last week as a measure that will cut rates on all 11 million new college loans this year, said he would soon release a plan to reform higher education and make it more affordable.

Connecticut's delegation in the Senate -- U.S. Sen. Richard Blumenthal and U.S. Sen. Chris Murphy -- were among 18 senators to vote against the bill. Blumenthal and Murphy said the bi-partisan measure was short-term relief that will cause long-term pain.

Even with an interest rate of 3.8 percent, Blumenthal said the federal government still makes $51 billion a year off student loans.

Blumenthal said he will propose new legislation Monday to provide more student loan forgiveness for students who consistently pay their loans on time. He also supports enabling students to work off their loans through public service.

The proposed bill would change the tax code so forgiven loans aren't regarded as taxable income.

"I am extremely disappointed that young people are getting a raw deal," Blumenthal said.